Good morning, it's Paul here!

I'm still jet-lagged, so am waking & sleeping at very odd times - no change there, I hear you cry! Anyway, I've been up since 4am today, and have finished yesterday's report , adding a new section on the trading update from Hornby (LON:HRN) . Quite an interesting special situation actually, but not one I'm tempted to buy.

Market comments

Small caps seem to be in a terrible patch at the moment, so my portfolio is really suffering. Still, it's a marathon, not a sprint, and this type of gloomy market is when (selectively) we can find some bargains. Also, I feel that 2017 was so ridiculously good, that many small caps became over-valued. So a correction to more sensible valuations was inevitable at some point.

Graham and I began to sound like a stuck record last year - concluding our reviews on many stocks, with - nice company, but the shares look too expensive. With valuations now generally having corrected downwards, hopefully we can unearth some more sensible buying opportunities this year. After all, the time to catch the bargains is when other people are too fearful to buy on good news.

I don't see any reason at all to expect a sustained bear market. We have good growth in the world economy, in all main regions. UK consumer confidence is fairly weak, but the outlook seems quite encouraging to me - inflation has peaked, and is now falling. We have full employment, wages are rising, and look set to soon overtake inflation - meaning that the pinch on disposable incomes is coming to an end.

Very unusual weather in the UK has also had an impact this year to date. Winter weather carried on through until the end of March. Therefore retailers & hospitality companies have seen lower footfall. There seems to have been a shift from consumer spending away from things, towards experiences - e.g. I read yesterday that holiday bookings are bucking the trend - surprisingly, at a time of weak sterling.

However, I think it's important to remember that, when we buy a share, we're not just buying this year's earnings, we're buying all earnings in perpetuity. So if prices are marked down because this year's earnings have been hit by one-off factors (such as poor weather), then that…

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